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BOOK SUMMARY

WILLIAM C. MITCHELL and RANDY T. SIMMONSForeword by GORDON TULLOCK

HIGHLIGHTS:

Increasingly, the American people view politics as a contemptible,
corrupting burden, wherein politicians and bureaucrats cater to special
interests to the detriment of the general public. Low voter turnout, gloomy
public opinion polls and acerbic chatter on radio talk shows are symptomatic of
a political cynicism that has reached new heights. Beyond
Politics now systematically explains how government has produced a
scandal of political myopia, bureaucratic self-interest, pressure group
manipulation, economic stagnation and public distrust.

The public's anger as evidenced in the landmark 1994 electoral firing
of the Democratic leadership will only be lessened through major reductions in
the costs of government and the social and economic problems produced by the
pervasive government bureaucratization of American life. Beyond
Politicstraces through the fundamental reforms now necessary,
without which even greater political upheavals will be in store for both major
parties, as voters come to view both as ineffectual.

The cost of politics to American society is enormous. For example,
about 3,200 trade associa-tions located in Washington, DC, employ an estimated
100,000 people, or 187 people for each member of Congress. More than 4,000
political action committees court members of Congress to influence government
policy and personnel. The average U.S. Senator must raise around $10,000 per
week throughout his or her six-year term for re-election campaign
expenditures.

Lobbying at the state level is also significant. For example, more
than 500 lobbyists spent over $12.5 million in 1987 to influence Washington
state's legislature, approximately $85,000 per member. In 1989, lobbyists spent
more than $1.6 million on worker's compensation legislation in Oregon -- a state
with 2.9 million citizens.

In contrast to the consumer-sovereignty of competitive markets,
political decision-making works to serve and enrich special interests at the
expense of the general public. For example, America's protectionist trade
restrictions cost Americans approximately $70 billion per year. During the late
1970s and early 1980s, the federal government spent over $250 billion annually
on subsidy programs.

By 1983, nearly 33 percent of all U.S. citizens received direct
government funding through non-means-tested programs. Most beneficiaries were
middle class clients of such programs as Social Security, Medicare, unemployment
compensation and veterans benefits. Another 19 percent were welfare recipients
receiving food stamps, Medicaid, Aid to Families with Dependent Children, and
subsidized housing.

Business cycles are manipulated for the political gain of incumbent
politicians and bureaucrats. Of the six U.S. presidential elections from 1959 to
1981, four witnessed an expanded money supply prior to the election and a
contraction soon after.

SYNOPSIS:

"Market failure" has been the rationale for government's recurrent
interventions to solve numerous problems, real and imaginary: pollution,
monopoly, unemployment and inflation, social injustice, poverty, illiteracy, and
many others. But governments -- liberal and conservative alike -- tend to worsen
social problems and create new ones as the inescapable problem of what is in
fact "government failure" takes hold, a failure rooted in the very workings of
politics and government bureaucracy. The new book, Beyond
Politics, shows that the problems created by "government failure" are
profoundly more enduring, serious and pervasive than the problems commonly
attributed to markets.

Authored by William Mitchell and Randy Simmons, the illuminating and lively
book, Beyond Politics, examines how modern political democracy
functions and falters. The book's aim is to free us of the misconceptions and
false hopes that predispose us to favor public policies bound to fail -- and to
examine systematically why they fail. Mitchell and Simmons analyze numerous case
studies of "government failure" in contemporary America, revealing that, "most
of what is commonly viewed as `market failure' is misunderstood, caused by
governmental policies." Indeed, the book shows that "government failure," rather
than "market failure," is the inescapable constant in social problems, endemic
to the way western political democracies currently operate.

Beyond Politics is realistic about politics. Forsaking the
romanticized view of government as omnipotent, benevolent provider, Mitchell and
Simmons ask not what would we like from government? But rather, what can we
expect from government -- given its knowledge, incentives and constraints? What
kind of knowledge does politics use and generate? How do political incentives
affect government behavior? How do political economic, budgetary, technical and
cultural factors limit government's capacities? Given the risks of government
failure, should we continue to expand the scope of government? If not, what
barriers to reform must we overcome? And what political presuppositions must we
change to do this? Without answering these questions, Mitchell and Simmons
demonstrate, public opinion leaders and policy-makers naively and recklessly
court futility or disaster.

Beyond Politics applies the insights of the burgeoning "public
choice" school of political economy, which studies political choices and
institutions using economic reasoning and analysis. "[Standard] economic
conceptions and tools, although helpful were inexact for use in political
theory," recalls public choice pioneer Gordon Tullock in the book's foreword,
"and hence it was necessary to develop new ones." These new conceptions and
tools have forged a revolution in thinking about government and, as Mitchell and
Simmons argue, help us to diagnose and treat the dysfunction of democratic
political rule.

Private Agendas, Perverse Incentives and Pathological Politics

Unlike many books on politics and public policy, Beyond
Politicsdoes not assume that public servants, even in advanced
democracies, have the means or intent to represent their constituents
faithfully, let alone to always "promote the general welfare and secure the
blessings of liberty." The book insists that politicians and government
bureaucrats, like consumers, business owners and private sector employees, all
necessarily have individual, private agendas in their work -- agendas based on
self-interest which are not magically discarded upon donning public-employee
robes. Because of the high cost for voters to monitor them closely, public
employees may stray far from their professed agendas, as they enlarge budgets,
expand perks and build careers. But, this is only the first of many causes of
government failure identified by Mitchell and Simmons.

Consider the group dynamics of the democratic process. Voters, interest
groups, politicians and bureaucrats exert enormous effort fighting for political
spoils. Through voting, lobbying, log rolling and maneuvering, their conflicting
agendas produce compromises with unintended consequences. Few get everything
they seek, but nearly everyone gets something. Although many regard this result
as a great virtue of democracy, such virtue is illusory. While the compromises
may suppress the symptoms of social discontent in the short turn, in the long
run the underlying conflicts often break out in more virulent form.

The process of democratic conciliation contains a perverse mechanism.
Typically, government handouts and favors are closely guarded by their
recipients, while the costs are hidden from the less organized but greater
numbers of people who bear them. This imbalance creates an opportunity for
well-organized constituents and pressure groups to gain parasitically from their
fellow citizens through stealthy wealth transfers. As these groups push for
more, and others copy their success, democratic inertia favors further rounds of
cannibalistic feeding at the public trough. Even well-intended programs run by
conscientious bureaucrats will diverge dramatically from their proclaimed
original intent.

In case after case, Mitchell and Simmons argue, public policy is driven,
shaped or distorted by narrow groups who manipulate the political process to fit
their private agendas. This pursuit of private gain in politics is a major
obstacle hampering government efforts "to do the right thing" -- even when
public servants know how, want to and otherwise could. Beyond
Politics shows how such "political entrepreneurship or opportunism" or
"rent seeking," as its called in public choice, contributes to government
failure in taxation, public schooling, consumer and environmental regulation,
trade and agricultural policy, central banking, unemployment and social welfare
programs, antitrust, and a host of other policies.

The Clean Air Act is typical of legislation resulting more from the influence
of political entrepreneurs than from its ostensible concern. Like much
environmental legislation, the Clean Air Act claimed that markets injure third
parties physically or economically by creating unwanted spillover effects or
"negative externalities." But most environmental problems, including pollution,
result not from markets and property rights, but from the externalities produced
where they are prevented from existing -- the "tragedy of the commons," where
resources are managed collectively by government in public domains where
environmentally unsound decisions stem from political influence, and the
property rights of injured parties are neither recognized nor defended. So,
instead of creating incentives to reduce pollution or protect those being
harmed, the Clean Air Act mandated power plant technology to benefit the more
politically influential producers of less efficient, high sulfur coal in the
eastern U.S. at the expense of more efficient, low sulfur coal producers in the
West. Not surprisingly, the Act's leaders in Congress were from West Virginia, a
major power base for both the predominantly eastern-oriented coal industry and
the United Mine Workers.

Another popular argument is that government must provide so-called "public
goods," such as roads, schools, parks, police -- goods deemed essential, but,
due to their alleged non-excludability of use by consumers, are viewed as
unprofitable for the private sector to produce. It is commonly thought that not
enough people would voluntarily pay for them, attempting instead to "free ride"
off others who have paid. But Mitchell and Simmons observe numerous fundamental
flaws in this "public goods" argument. First, no goods or services are purely
"public goods," and all such goods have been and are increasingly provided
privately (parks, lighthouses, roads, security guards, and so forth) and have a
long history of private provision. Today, technological improvements are now
enabling private entrepreneurs to minimize most free riding, and thereby make it
even more profitable to provide such goods. Furthermore, in no way does
government provision eliminate the free rider problem. On the contrary, by
socializing the cost of producing goods through government, those in positions
of greater political influence will stand to benefit at the expense of those
politically less powerful. And since government-provided public goods tend to be
provided in single quantities equally available to all citizens regardless of
their preferences, the same citizen can be under-supplied with some public goods
and over-supplied with others.

Ironically, most recipients of government largess, fixated on extracting more
from the transfer system, fail to realize that they also lose on net from this
negative-sum game, because their gains are greatly offset as they subsidize the
booty of others also seeking benefits. In addition, political
entrepreneurs sooner or later must pay significantly in order to play. To
protect their privileges from envious rivals or angry taxpayers, they will
likely spend princely sums lobbying officials and rallying public support. The
rate of diminishing returns from rent-seeking varies case by case, of course,
but for society overall and for most political entrepreneurs, rent-seeking
becomes a lose-lose game. Again, the total cost is largely hidden: the social
deadweight losses resulting from the rent-seeking/transfer game also include the
unrealized benefits of what would have been created had labor and capital been
employed enlarging the economic pie through the market process, instead of
wrestling for its shrinking pieces.

Mitchell and Simmons suggest that the "high school civics" view of political
democracy is colored by rose-tinted glass. Although their view roughly parallels
Adam Smith's "invisible hand" theory of the market process, market
entrepreneurship differs profoundly from political entrepreneurship. Mitchell
and Simmons argue that political and market processes differ fundamentally in
what they can offer, the means of making these things available, and the
constraints they face. Government interventionism tends to destroy social
harmony.

Market Carrots versus Government Sticks

Since the publication in 1776 of Smith's treatise The Wealth of
Nations, economists have often remarked that the market process is a
powerful engine of creativity, ingeniously enlisting the self-interest of each
to serve the self-interest of others. The self-interested pursuit of profit is
assisted by the price system, which helps to communicate consumer preferences
and permits calculation of which alternative methods and innovations create the
greatest economic value while using the least-valued combination of inputs. When
market entrepreneurs miscalculate badly or consistently, Mitchell and Simmons
reiterate, sooner or later they lose out to visionaries alert to the profit
opportunity, enterprising enough to marshal the needed resources, able to
effectively manage their internal divisions of labor and gutsy enough to take
the risks. Because the private use of force is outlawed, they must achieve their
ends entirely by persuasion. Day after day, market entrepreneurs must offer
positive values to their customers, or get pushed aside -- they cannot last long
by offering "lemons" or running negative advertising campaigns.

Some call this weeding-out process "the survival of the fittest," failing to
distinguish the peaceful cooperation and competition of the market from the
coercion embodied in the jungle of the political system's wars which use
government power over the citizenry. In direct contrast to this coercion of
political control, the voluntary exchange of markets is more precisely "the
survival of the providers." Successful market entrepreneurs provide solutions to
economic problems. Though this process of social coordination is not widely
understood, its precepts have been at least partly accepted into public
discourse. Much less understood, Mitchell and Simmons explain, are the
foundations on which the market rests and the significance of the polar
differences between the signaling and feedback mechanisms of the market process
and those of politics.

In contrast to the marketplace, legitimate feedback in the political arena is
infrequent and indirect. Nothing in the political process tends to promote the
solving of economic problems or the enhancement of social coordination.
Politicians lack market standards for measuring success, and rely for feedback
on well-organized political entrepreneurs (special interest groups) or
uninformed voters. Bureaucrats set in motion by politicians are even less
accountable to voters. Even when informed about the issues, voters cannot
express their intensity of preferences as effectively through periodic elections
as they can every day in the marketplace by voting with their pocketbooks.

Lacking the means and incentives to maximize value and conserve inputs,
politicians and bureaucrats must build their empires by dispensing tax-funded
favors and expanding, not economizing, their budgets. Parasitism prevails
because they do not create wealth -- they appropriate it from Peter to pay off
Paul, and vice versa.

But the greatest difference between political and market entrepreneurship,
Mitchell and Simmons remind, is that politicians and bureaucrats retain the
police power of the State. And when this force is wielded for political
purposes, without consideration of individual rights, due process, and the Rule
of Law, the government whose first duty is to protect rights becomes its worst
violator.

So what can we expect from government? Given the current rules of the game
Mitchell and Simmons demonstrate, what occurs is pretty much what we should
expect: the political economy of envy, distrust and stagnation. Mitchell and
Simmons prefer neither the mutual plunder of democratic politics nor the bloody
tyranny of dictatorship, but like the federalists and anti-federalists of
America's founding period, they believe that this is a false choice.
Beyond Politics vividly demonstrates that government power must be
radically reduced to eliminate the predation of the citizenry by private
interests. In so doing, the book contributes to the "eternal vigilance" needed
to achieve and sustain the republican ideals envisioned by the architects of
America's experiment in self-government and lays the groundwork for a political
order more resistant to the virus of rent-seeking that now tests our
civilization.